Acc ch.10 Extra Practice
Accruing a liability always involves ______ expenses and ______ liabilities.
increasing; increasing
A(n) _______ note requires the borrower to pay equal payments over the note's life to maturity with each payment consisting of interest and principal.
installment
John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: Social Security $37.20; Medicare $8.70; Federal Income tax $58; and State income tax $10. What is John's net pay?
$486.10 Net pay = $600 - $37.20 - $8.70 - $58 - $10 = $486.10.
Bonds are financial _______ that outline the future payments a company promises to make in exchange for receiving a sum of money now.
instruments
From the issuing company's perspective, a bond is a liability. From a bondholder's perspective, the bond is a(n) _______ .
investment
Assume ABC Company issues a bond with a stated interest rate above the market rate. Using the simplified effective-interest amortization, interest expense is ______ the cash interest payment.
less than
Assets are financed with _______ and stockholders' equity.
liabilities
Bonds are issued at a discount when the bond's stated interest rate is ______ the market interest rate.
lower than
Liabilities are classified as current if they
will be paid within the company's operating cycle or within 1 year, whichever is longer
_______ on a classified balance sheet report the obligations that will be paid or met within the company's operating cycle or within 1 year, whichever is longer.
current liabilities
If a bond's stated rate is 4% and the market rate is 6%, this bond will sell at ______.
a discount
Which of the following are not required payroll deductions from an employees' gross earnings?
- State unemployment tax (SUTA) - Federal unemployment tax (FUTA) - Charitable contributions
The entry to record the issuing of a note payable for cash results in a(n) ______.
- increase in assets - increase in liabilities
Bond premium is the amount by which a bond's issue price ______ its face value.
exceeds
A liability is first recorded at the amount of cash a creditor would accept to immediately settle the liability, which ______ interest.
excludes
The entry to record the initial borrowing of cash by issuing a promissory note includes a debit to ______ and a credit to ______.
Cash; Notes Payable
Using the simplified effective-interest amortization, the credit to Cash each interest payment equals ______.
Face Value x Stated Interest Rate x Time
True or false: All payroll deductions are required by law.
False Some payroll deductions such as retirement savings are voluntary.
True or false: Companies issue bonds at a discount when the bond's stated interest rate is lower than the market interest rate.
True Bonds issue at a discount when the stated interest rate is lower than the market interest rate.
A bond with an issue price of $10,100 and a face value of $10,000 was issued at ______.
a premium
_______ is a current liability that represents the amount owed for goods or services purchased on credit and is generally interest free.
accounts payable
Accruing a liability always involves recording both a(n)______ and a liability.
expense
If a bond's stated rate is 4% and the market rate is 4%, this bond will sell at ______.
face value
Using the simplified effective-interest amortization, the debit to Interest Expense equals ______.
Bonds Payable, Net x Market Interest Rate x Time
Accounts (or trade) Payable is a ______ and increases when ______ and decreases when ______.
current liability; purchases are made on credit; bills are paid
An installment note differs from an interest-only note in that it requires the borrower to ______.
pay equal amounts over the note's life to maturity with each payment consisting of interest and principal
Face Value
stated rate equals the market rate of interest
Premium
stated rate is greater than the market rate of interest
Discount
stated rate is less than the market rate of interest
Net pay is calculated by ______.
subtracting payroll deductions from gross pay